Calculation

• You must carry out two calculations to see if you qualify under FHA guidelines. The first is to calculate what percentage of your income the new housing debt will represent. Add up the proposed monthly mortgage payment, plus your insurance premium and taxes. Then divide that by your monthly income. The second calculation looks at your total debt-to-income ratio. Take your previously calculated housing debt and add your other monthly debt service payments, then divide this by your income.
  
  

What's Included

• When you are calculating your total debt-to-income ratio, you must include your car payment, any other secured or unsecured loan payments, your credit card minimum payment and any child support you are paying that's court-ordered.
  
  

What's Excluded

• You can exclude certain payments from your calculation. These are your current rent payment, your utilities and child care expenses. You can also exclude payments on any debt that will be paid off in less than 10 months.
  
  

Allowable Ratios

• You can qualify for an FHA-backed loan if your housing debt ratio is 29 percent or less and your total debt ratio is 41 percent or less. By contrast, a conventional loan would require ratios of 28 percent and 36 percent. If either of your debt-to-income ratios are higher than the FHA maximums, you might only be able to qualify if you have a down payment that's larger than the FHA minimum of 3 percent. Lenders do have a degree of discretion, but they must detail on the Mortgage Credit Analysis Worksheet why they believe the loan represents a reasonable risk.